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Here’s the earnings on the long put at expiration: In this example, the put breaks even when the stock closes at choice expiration at $19 per share, or the strike rate minus the $1 premium paid. Below $19 the put increases in worth $100 for every dollar decline in the stock. best options trading platform. {keywords}.

The benefit on a long put is almost as good as on a long call, since the gain can be multiples of the option premium paid. Nevertheless, a stock can never go below no, topping the benefit, whereas the long call has theoretically unrestricted benefit. Long puts are another easy and popular method to bet on the decline of a stock, and they can be much safer than shorting a stock ({keywords}).

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If the stock closes above the strike cost at expiration of the option, the put ends useless and you’ll lose your investment. {keywords}. A long put is a good option when you expect the stock to fall considerably prior to the option expires ({keywords}). If the stock falls only somewhat listed below the strike rate, the option will be in the cash, however might not return the premium paid, handing you a net loss ({keywords}).

Short put, This technique is the flipside of the long put, however here the trader offers a put referred to as “going short” a put and expects the stock cost to be above the strike rate by expiration – {keywords}. In exchange for offering a put, the trader receives a cash premium, which is the most a brief put can make.

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Stock X is trading for $20 per share, and a put with a strike cost of $20 and expiration in four months is trading at $1 ({keywords}). The contract pays a premium of $100, or one agreement * $1 * 100 shares represented per contract. Here’s the profit on the short put at expiration: In this example, the brief put breaks even at $19, or the strike cost less the premium got.

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In between $19 and $20, the put seller would make some however not all of the premium – {keywords}. The advantage on the brief put is never more than the premium got, $100 here ({keywords}). Like the short call or covered call, the maximum return on a brief put is what the seller receives in advance ({keywords}).

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